A living wage for Wal-Mart workers

It’s a core American value that if someone works hard, he or she deserves to live in dignity, and yet the $7.50 hourly wage that Wal-Mart CEO Lee Scott pays thousands of his workers doesn’t meet that basic standard.

These workers often must choose between paying the rent or bringing their child to the doctor. To force workers to make such choices does not reflect good family values on Wal-Mart’s part.

Scott recently announced he will be capping wages and using more lower-paid part-timers. Easy for him. He made $10 million last year.

Defenders of the company will tell you that Wal-Mart saves poor Americans billions of dollars with its low prices. They claim that raising wages would make Wal-Mart uncompetitive.

Wrong.

Wal-Mart could lift the average salary of its 1.3 million U.S. workers by a hefty$4,000 a year without raising the price of its pickles or Pampers even one penny.

How? In 2005, Wal-Mart cleared profits of $11.2 billion. It would take less than half of that to cover the cost of these raises for its workers, leaving profits that would still dwarf all but a handful of giant firms.

The descendants of Wal-Mart founder Sam Walton could also help spread the wealth. According to Forbes magazine, seven of them have combined fortunes of$82.5 billion. They could contribute a little of the fruits of the company to help Wal-Mart workers live with more dignity while still keeping their billionaire status.

Henry Ford’s old adage that it’s good for business to pay workers enough to buy the products they make still holds true. When Ford hiked his workers’ pay to $5 a day in 1914, he sold more cars. Similarly, a living wage for Wal-Mart workers would likely boost the company’s bottom line.

Still, there will be those who say that sharing some of Wal-Mart’s profits this way would unfairly burden shareholders. But should public policy cater exclusively to their narrow interests? In the Wal-Mart case, this means catering to a large extent to the Walton heirs, who own 40 percent of the company’s stock.

Sure, some ordinary folks also own Wal-Mart stock. But corporations, particularly mega-firms like Wal-Mart, have impacts that go far beyond shareholders. Alas, their corporate charters tell such firms to maximize profits no matter whether that means paying poverty wages, shifting health care costs to taxpayers or polluting the environment. Those charters should be revised.

In addition, it’s appropriate that government at all levels should set rules that encourage firms to do the right thing.

New data underscore the need for this. The ratio of corporate profits to workers’ wages has never been greater in the post-World War II period. And CEOs now bring in more than 400 times what the average worker makes.

Fortunately, there are practical tools for narrowing the gaps. A good start would be to raise the wage floor so that all Americans – whether they stock shelves at Wal-Mart or flip burgers at McDonald's – can live in dignity. We should strengthen protections for workers who want to form unions to negotiate for better pay. And we should attach strings to government contracts to make sure our tax dollars support good jobs.

Without new incentives, the Wal-Marts of the world are unlikely to change. And in the richest nation in the world, there’s just no excuse for staying the course when it comes to the blatant gap between those at the top and the working poor.

John Cavanagh is the director and Sarah Anderson is a fellow at the Institute for Policy Studies in Washington, D.C. They co-authored “Field Guide to the Global Economy” (New Press, 2005). They can be reached at pmproj@progressive.org.